Official figures show that US consumer spending rose by more than expected in December to post the sixth straight month of gains as households drew down on their savings to fund purchases.
The Commerce Department said spending increased 0.7% after rising by 0.3% in November. Economists had expected spending, which accounts for about 70% of US economic activity, to increase by 0.5% last month.
The spending figures were included in the government's fourth-quarter gross domestic product (GDP) report released on Friday, which showed the economy grew at a 3.2% annual pace on the back of robust consumer spending.
Spending in the fourth quarter grew at a brisk 4.4% annual pace, the fastest in more than four years. While economists see spending remaining strong this year, they expect the pace of growth to be less brisk than in the last three months of 2010.
Spending in December came as incomes increased 0.4% and savings dropped to their lowest level since March. Incomes grew 0.4% in November and the increase last month was in line with economists' expectations. Savings fell to $614.1 billion from $634.4 billion in November.
The report also showed the Federal Reserve's preferred measure of consumer inflation - the personal consumption expenditures price index, excluding food and energy - was unchanged in December after edging up 0.1% in November. In the 12 months through December, the core PCE index rose 0.7%, the smallest increase since records began in 1959, after increasing 0.8% in November.
